Mkt 300 12.7

# Mkt 300 12.7 - Q = 100 – 80 = 20 Man Profits =(60 20*Q = 40*20 = 800 Retail Profits =(P W*Q =(80 60*20 = 400 What if the Manufacturer charges a

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Mkt 300 12/7 Channel Strategies - you cannot tell the retailer how much to charge – it is up to them, but you (the manufacturer) are in charge of setting the wholesale price. The retail price is based off of the wholesale price Channel Pricing - 20 comes from the variable cost 1. Profit = (P - W)*Q = (P - W)*(100 - P) = 100P-100W-P 2 + WP Profit Function 2. Profits/P = 100-2P + W = 0 2P = 100 + W P = 50 + ½ W Express the profit function in terms of ‘w’. Manufacturer Profits = (W - 20)*Q = (W - 20)*(100 - P) = (W - 20)*(100 – 50 - ½ W) = (W - 20)(50 - ½ W) = 50W – 1000 – ½ W + 10W = 60W – 1000 – ½ W 2 Man. Profits/W= 60 – W = 0 P* = 50 + ½ (60) = 80
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Unformatted text preview: Q* = 100 – 80 = 20 Man. Profits = (60 - 20)*Q = 40*20 = 800 Retail Profits = (P - W)*Q = (80 - 60)*20 = 400 What if the Manufacturer charges a Two-Part tariff? 1. Compute how the Retailer will respond to the Manufacturer’s offer 2. Then compute the Manufacturer and Retail profits Discussion of Channels-when you sell to a retailer, there will be issues with managing the image of your brand-way to feature your product may dilute your brand image (ex: Lexus commercial vs. Lexus dealership commercial)-by changing a product line (making things exclusive) you can give retailers more power...
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## This note was uploaded on 12/11/2011 for the course MKT 300 taught by Professor Barnes during the Fall '08 term at Wisconsin.

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